Check whether a rental property stacks up. Enter the price, rent, costs and an interest-only mortgage to see gross and net yield, annual cash flow and return on the cash you put in.
Results are estimates for planning. Check the figures before you make a financial or health decision.
How the Buy-to-let yield and rental profit calculator works
Gross yield is annual rent divided by the purchase price. The tool then takes off voids (the share of the year empty) to get rent collected, subtracts the letting agent’s percentage and your annual running costs, and divides what is left by the price for the net yield before the mortgage.
Mortgage interest is the loan multiplied by the rate, assuming interest-only. Annual cash flow is the operating profit less that interest. Cash invested is the price less the mortgage, plus Stamp Duty Land Tax and your other buying costs. SDLT is an estimate for England at the additional-dwelling rates, taken from our stamp duty calculator. The return on cash invested is cash flow divided by cash invested.
The optional tax line uses your marginal rate on the operating profit, less a credit at 20% of mortgage interest, which reflects the Section 24 rule. That rate is from memory, so check GOV.UK. It is a rough estimate: it ignores other income, the property allowance, capital costs and ownership through a company.
Worked example
Using the default values in the calculator above:
| Input | Value |
|---|---|
| Purchase price | £250000 |
| Monthly rent | £1200 |
| Void periods | 5 % |
| Letting agent fee | 10 % |
| Running costs per year | £1500 |
| Other buying costs | £2000 |
| Mortgage amount | £150000 |
| Mortgage interest rate | 5.5 % |
| Your marginal income tax rate (optional) | 20 % |
Return on cash invested, after tax: 1.75%
| Gross yield | 5.76% |
|---|---|
| Net yield (before mortgage) | 4.32% |
| Annual rent collected | £13,680.00 |
| Agent fees | £1,368.00 |
| Running costs | £1,500.00 |
| Operating profit before finance costs | £10,812.00 |
Tips and common mistakes
Be realistic with voids and running costs, because understating them is the most common error. Include repairs, insurance, safety certificates and service charges, but not improvements, which are treated differently for tax. Test the result with a higher interest rate, since a mortgage on a remortgage may cost more. Net yield tells you about the property, while return on cash tells you about your money, so look at both. Rules for landlords change, so check GOV.UK, and consider advice from an accountant on tax before you buy.
Frequently asked questions
What is a good rental yield?
There is no single figure. Compare the net yield with the cost of the mortgage and with other places you could put the money, and allow for risk and effort.
Why is my tax estimate not exact?
The tool applies a single marginal rate to the property profit and a 20% credit on interest. It ignores your other income, allowances and whether you own through a company, so treat it as a guide.
Does it include stamp duty?
Yes. It estimates SDLT for England at the additional-dwelling rates and adds it to the cash you invest. Scotland and Wales have their own taxes, so check them separately.